ANIMAL SPIRITS

ANIMAL SPIRITS

George A Akerlof


TO UNDERSTAND how economies work and how we can manage them and prosper, we must pay attention to the thought patterns that animate peoples ideas and feelings, their animal spirits. We will never really understand important economic events unless we confront the fact that their causes are largely mental in nature. It is unfortunate that most economists and business writers apparently do not seem to appreciate this and thus often fall back on the most tortured and artificial interpretations of economic events...
We started work on this book in the spring of 2003. In the intervening years the world economy has moved in directions that can be understood only in terms of animal spirits. It has taken a rollercoaster ride. First there was the ascent. And then, about a year ago, the fall began . But oddly, unlike a trip at a normal amusement park, it was not until the economy began to fall that the passengers realised that they had embarked on a wild ride. What had people been thinking Why did they not notice until real events the collapse of banks, the loss of jobs, mortgage foreclosures were already upon us There is a simple answer. The public, the government, and most economists had been reassured by an economic theory that said that we were safe. It was all OK. Nothing dangerous could happen. But that theory was deficient . It had ignored the importance of ideas in the conduct of the economy. It had ignored the role of animal spirits.